The European Union doesn’t have the resources to rescue Spain if it “collapses,” an event that could lead to the end of the euro, Nobel Prize-winning economist Christopher Pissarides said.
A collapse would be “a very serious problem,” Pissarides, who teaches at the London School of Economics, said at a forum in Beijing today. Such an event “might even see the end of the euro as a common currency,” he said.
Spain plans to auction debt tomorrow in the next test of investors’ confidence that the nation can weather Europe’s sovereign-debt woes. Prime Minister Jose Luis Rodriguez Zapatero is aiming to prove he can finance his government’s commitments amid high unemployment and after bailing out savings banks.
“If Spain collapses the way Greece has collapsed I don’t think the European Union has the resources to rescue it,” Pissarides said.
Pissarides shared the 2010 Nobel Prize in economics with Dale Mortensen and Peter Diamond for research into the difficulties of matching supply and demand, particularly in the labor market.
The euro rose to $1.2990 as of 1:45 p.m. in Tokyo from $1.2974 yesterday on speculation that bond purchases by China and Japan may help to stem Europe’s crisis. Japan pledged yesterday to buy debt issued by Europe’s financial-aid funds.
Ireland in November became the second euro country after Greece to seek a bailout and the first to request aid from the European Financial Stability Facility.
Portuguese Prime Minister Jose Socrates said yesterday that Portugal doesn’t need a bailout from the EU and its 2010 budget deficit will be lower than forecast. Socrates said rumors that the country needs aid are only helping “speculators” while hurting Portugal and the euro.
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